 "IDFC First Bank")
Shares of IDFC hit a 52-week high of Rs 115.40 as they rallied 5 per cent, while those of IDFC First Bank slipped 3 per cent to Rs 79.54 on the BSE in Tuesday's intra-day trade after the respective boards approved the reverse merger.
In the past one year, the stock price of IDFC First Bank has zoomed 131 per cent, while that if IDFC surged 107 per cent. In comparison, the S&P BSE Sensex has rallied 23 per cent during the period.
The board of IDFC First Bank has approved the merger of IDFC Ltd and IDFC Financial Holding Company with itself through a scheme of amalgamation. Shareholders of IDFC Ltd will get 155 shares of IDFC First Bank for every 100 shares held in the former. The Scheme is subject to the receipt of requisite approvals from the statutory and regulatory authorities.
As per conditions of the Reserve Bank of India's (RBI's) Guidelines for Licensing of New Banks in the Private Sector on February 22, 2013, the equity shares of IDFC First Bank must be listed on a recognised stock exchange in India within a time period of 3 (three) years of commencing of business as a bank. The promoter(s) namely IDFC must not be conducting any financial regulated business directly under it.
As a result of the proposed merger, the standalone book value per share of the Bank would increase by 4.9 per cent, as calculated on audited financials as of March 31, 2023.
On rationale, IDFC First Bank said the merger will lead to simplification of the corporate structure of IDFC FHCL, IDFC Limited, and IDFC First Bank by consolidating them into a single entity and will help streamline the regulatory compliances of the aforesaid entities. The merger will help create an institution with diversified public and institutional shareholders, like other large private sector banks with no promoter holding, the bank said.
The opportunities in the Indian banking system are expected to grow manifold in the next decade and the Bank is well placed to participate in and contribute to such growth.
"The Bank has a robust lending model, with proven and consistent track record of high asset quality of over a decade, including the track record of the companies that combined to create IDFC First Bank," the bank said while listing the benefits of the Scheme.
Meanwhile, CRISIL Ratings (CRISIL), on June 2, upgraded its rating on the tier II Bonds (under Basel III) of IDFC First Bank amounting to Rs 5,000 crore from 'CRISIL AA / Positive' to 'CRISIL AA+ / Stable'. It also re-affirmed CRISIL A1+ rating on the bank's existing Certificate of Deposits amounting to Rs 45,000 crore.
"The rating upgrade is driven by steady scale up of business, backed by strengthening of retail asset and liability side franchise, improved asset quality, and expectation of continued improvement in operating and overall profitability. Furthermore, the ratings reflect the bank’s healthy capitalisation level," CRISIL said.
Over the medium term, the bank's capital position is expected to remain healthy while its earnings profile continues to improve. The asset quality is also expected to remain stable but as the business continues to scale with higher focus on the retail segment, the bank’s ability to sustain asset quality and profitability along with growth will remain a key monitorable," it added.
